Projects which have been reported become invisible to the user who reported them and show a page similar to the "Unshared project" page. Comments will also become invisible, and if enough reports are received, the comment will be deleted. Moderators can later restore a deleted comment.[1]

Misusing the report feature, such as reporting for disagreement, is not allowed and a scratcher will get a punishment such as a ban for misusing the report feature.

Sometimes if the content is too serious, it will be sent to the law enforcement.[2]
According to Scratch Team member cheddargirl, only 3 cases have resulted in a situation like so.

Reporting Users

Click the button to report another user.

Reporting a user.

To report a user, one can go to their user page and click on the Report this User button below the What I've Been Doing section.
Then one should select whether they are reporting the username, icon, About Me or What I'm Working On. Once one has selected what they are reporting, they should either press Send to send the report to the Scratch Team or press Cancel to cancel the report.

When Should a User be Reported?

Examples when a user should be reported:

If their username is inappropriate

If they have an inappropriate icon

If there is inappropriate text in the description fields

The "user" is impersonating another user

Reporting Projects

The button to press if one thinks a project is inappropriate.

Where you type in your reason

To report a project, click on the "report this" link below it next to the Project Statistics, select a reason and type what the prompt commands the user to do in a box. The Scratch Team will review the project. If many users report the same project, it is temporarily removed from the site. When one reports a project, it is not displayed for them; instead, a page resembling the "Unshared Project" page is displayed.

Pre-written reasons

Copied project (Asked to give URL of the original project)

Uses image/music without credit (Asked to provide links which contain content not credited in the project)

Too violent or scary (Asked to tell why the project is violent or scary)

Inappropriate language (Asked to give where inappropriate language, or "swearing", occurs in the project)

Inappropriate music (Asked to provide name of the audio file with the inappropriate content)

Inappropriate images (Asked to give the name of the sprite or backdrop with the inappropriate image)

Reporting Comments

To report a comment, simply click the "Report" button in the top-right corner. Scratchers should always report spam and inappropriate comments. Reporting comments is the only time when reporting on the Scratch website where users can not give a reason why they are reporting the comment.

Types of Comments That Should be Reported

Reporting Forum Posts

The Report Button with the mouse pointer on it.

This button is used to bring a post to a moderator's attention. However, unlike common misconception, it is not only for reporting inappropriate material; it can also be used to request common tasks which require moderator abilities, like thread renaming, closing, or moving.

How the system works

A forum post in Scratch 1.4 that has been reported four times and placed under review.

When a post is reported, a message is sent to all the Community Moderators and members of the Scratch Team, who can process it. On Scratch 1.4 and in Scratch 2.0,[4] if a post is reported four times by four different Scratcher accounts, it is automatically hidden and the user who posted it is temporarily banned for the remainder of one day, during which time the Scratch Team can look into the issue.

Once a report is processed, a moderator will "zap" it, removing it from the queue.

Reporting for no specific reason is considered spam, and is frowned upon, as it wastes the moderators' and Scratch Team's time. If a user does it once, they will receive an alert. Doing this multiple times can result in a ban.

Reporting

Type into the box and click submit to report a post.

This is what the reports queue looks like from a moderator's perspective

To report a post, click on Report on the bottom right of a post. It links to a page with a comment box. Type the reason for reporting the post, then press "Submit" (or press Alt+Shift+S on your keyboard).

This page can also be accessed at:

http://scratch.mit.edu/discuss/misc/?action=report&post_id=POSTID

Reporting Studios

The button to report a studio.

Reporting a studio.

To report a studio, one can simply click the "Report this studio" button beneath its thumbnail.

You can then select what you're reporting by selecting from Title, Description, or Thumbnail. You can press Send to send the report (if you've selected something), or click outside the report menu to cancel the report.

The message that shows after the studio was reported.

Reporting Classes

The button to report a class.

Reporting a class.

To report a class, click on the button that says "Report this class" below the Latest Activity section of the class's class page. Then a box should appear. Type in the reason why you are reporting the class. Then click on the Send button to send the report. If the class was making disrespectful or inappropriate comments, report those comments, not the class.